WholeFarm Budget

1
Whole-Farm Budget

• Farm Plan Project

2
The Whole Farm Budget

• Gross revenue from each enterprise
• Product costs (one total) from all enterprises
• Total hourly labor costs
• Income from government payments and other sources
  than the enterprises in the LP
• Fixed Costs
• Estimated of Net Farm Income from Operations

3
Gross Revenue

• Take the "level" of the enterprises from your
  final LP tableau and multiply that number by the
  gross revenue per unit (acre or head) in the
  enterprise budget.
• Do this for each enterprise that is non-zero.
• If an enterprise level is not a whole number,
  round it to the nearest acre or head.

4
Production Costs

• Remember to round each enterprise level to the
  nearest whole number.
• Calculate total production costs as (level
  enterprise 1 X variable costs enterprise 1)
  (level enterprise 2 X variable costs enterprise
  2) etc.
• The variable costs for each enterprise come from
  the enterprise budgets.

5
Hourly labor

• If you allowed hiring of hourly labor in your
  second LP, total the number of hours you expect
  to hire and round to the nearest whole number.
• Multiple the total hours by the hourly wage you
  will pay (which should match what you used in the
  objective function as a cost.
• The sum of production costs and hourly labor
  expense is your projected variable costs.

6
Gross Margin from LP Activities

• Subtract the projected variable costs from the
  gross revenue from the enterprises.
• Compare this number to the LP objective value.
• These numbers should be almost identical, give or
  take a few dollars for rounding of levels to
  nearest whole number.

7
Overall Gross Margin

• Use your data from last year to estimate next
  year's government program payments and other farm
  income.
• Add expected government program payments and
  other farm income to the gross margin from LP
  activities to get the overall gross margin.

8
Fixed Costs

• Fixed costs will include fixed labor cost, fixed
  interest, property taxes, insurance, utilities,
  land rent, and depreciation.
• Use last year's data to estimate next year's
  cost.
• For the interest, be sure you include here only
  the "fixed interest" from your data. Variable
  interest is included in the estimated production
  costs.

9
Projected NFIO

• To find the projected NFIO, subtract the fixed
  costs from the overall gross margin.
• Compare this number to your last year's NFIO (on
  income statement).
• Did it increase? If so, was it a substantial
  increase or a small one?
• Did it decrease? If so, why? You'll need to
  look at prices and yields in the enterprise
  budget compared to what you received last year.

10
Whole Farm Budget for Example Farm
you can pop this object open to see
the calculations.